future of retail

I’ve been bombarded with client and media requests in the last few weeks all asking about the Future of Australian Retail and what might happen in a post-Amazon world.

First advice, take a deep breath and calm down.

Second, think back to the hysteria of 2008 / 2009 when online shopping first hit Australia and Gerry Harvey and many others declared the imminent death of all retail stores and I’m fairly sure a decade on, we still have lots of great physical stores we can walk into and shop at and a resurgence of the local strip shopping centre.

The retail world has changed, of course and there’s been a huge uphill battle to come to terms with the new omni-channel always open retail landscape.

Some have lost the battle and disappeared. Others have joined it and won.

But those that have succeeded all seem to have one thing in common – the ability to provide an incredible consumer experience (CX is the new buzzword for this).

In this brave new retail world, we have to create opportunities out of roadblocks and take a broader view of where the cash register has to ring.

It may not ring in store, it may ring online, but does it really matter where as long as it rings?

Physical retail still has its place perhaps it is for the immediate purchase of goods, perhaps it’s for showrooming and trial, perhaps it’s for pick up of online orders, maybe it’s to engage with an expert before making a decision, maybe it’s to build and reinforce a brand community.

The only job a great retailers has is to make sure that every customer touch-point, whether physical, mobile or online is incredible and satisfying, because that’s what causes cash registers to ring.

And this is where I picked up the conversation with ABC’ Far North’s Phil Staley in our regular catch looking at all things future of retail , so have a listen now (12 mins 24 secs) and then let me know your favourite retailers and why..

on the eve of my heading off overseas to deliver a Future of Retail keynote to one of the world’s largest FMCG brands, David Ross of the New Daily and I caught up to have a look at Australia’s retail scene past, present and future…

It’s not news to anyone that Australians love to shop but there are some dramatic cultural changes under way that show where we spend our bucks is changing dramatically.

While previous decades were about the stuff we bought, the networked digital world seems to be making us crave social consumer experiences.

The latest Australian Bureau of Statistics figures show this changing face of Australian consumers.

Despite talk of flat wages and rising living costs, we’re lashing out big time on eating out with spending in cafés and restaurants up almost 7 per cent in just one year.

Sean Sands from Monash University said the strong growth in dining spending reflects consumer connection ambitions.

“It’s driven by people’s desires to socialise,” he said.

Between June 2016 and June 2017 spending on household goods rose 6.9 per cent. But we’re getting choosy on where we buy, with spending in department stores actually falling 2.4 per cent despite spending on clothing, footwear and personal accessories up 1.07 per cent.

Dr Sands said the drop of spending in department stores reflected a return to the high street experience.

“A lot of people want to shop locally,” he said.

Retail and business futurist Morris Miselowski told The New Daily things have changed significantly in Australia’s shopping landscape since the global financial crisis in 2008.

“We’ve seen retail change dramatically over the last decade,” he said.

The arrival of international brands opening flagship stores in the heart of our capital cities has been a significant part of that.

But big-name brands aren’t finding it smooth sailing, British brand Topshop has entered administration. This is in contrast to several other imports, like Zara, H&M and Aldi which so far have been able to deliver what Australians are looking for.

Mr Miselowski said Topshop failed to understand what Australians want and so we didn’t go for their offer.

He told The New Daily that Topshop didn’t grasp that “Australians are more laid back” in their shopping and their style “didn’t make sense to our local vernacular”, he said.

Mr Miselowski said as online spending has grown, many people have started treating some big stores like showrooms, going there to check prices.

But some household names are doing well. Harvey Norman is one reporting net profits up 29 per cent to $448.9 million on the back of people buying household goods as we build and renovate at record levels.

In the post global financial crisis world many households have cut back spending on credit with the return of lay-by and other new retail functions through online platforms.

Dr Sands said one key area the recent sales figures showed was the continued growth in online shopping.

“Australians are spending more online and are purchasing from small and medium enterprises at a larger rate,” he said.

Will On, co-founder of online shipping platform Shippit, which ships products for many Australian retailers, said they were seeing a huge growth in online retailing as Australians look for flexibility.

“Australian consumers are looking for the basics,” he said. For many products “it’s a lot easier to buy online instead of picking up”.

Shippit’s most shipped items are clothing, followed by pet food, however the things Australians are looking for varies significantly during the week.

New technology companies like Shippit are able to see how spending changes across a single day.

Mr On told The New Daily that three-hour express clothing deliveries are more popular on Friday afternoon than any other time during the week as people planning to go out left shopping to the last minute.

I’m going to call this out, just like I did back in 2009 when I curated the Retail Store of the Future exhibition , the future of the routine stuff we buy in stores is going to be automated, mechanised and stuffed full of new tech, because it can and because we want it to – I know some of you are going to yell you don’t, but if enough of us truly passionately didn’t want it, then we wouldn’t let it happen.

This morning Amazon Go announced its newest foray into retail, a fully automated physical bricks and mortar supermarket that allows customers to swipe themselves into the store, shop for items, put them in their basket and then leave the store without having to physically pay.

Behind the scenes the same technology that’s being used in autonomous cars is plying its computer vision and sensor fusion to spy on you (with our permission) to watch and figure out what we’re taking and then debit our account for the cost of it.

Putting the tech to one side, behind this tech laden experience Amazon is moving away from the typical supermarket that stocks on average 50,000 items to a more discreet stocking level of around 20,000 item representing the most purchased items for that local area and also greatly upping the artisan made, fresh, grazing, multi purchase local angle.

The notion is not to do away with people contact where it matters, but rather to create a frictionless store, where finding and buying what you want is as easy and hassle free as the vast majority of shoppers, in survey after survey, say they want.

Will it work, time will tell. But amazon has the logistics, the tech smarts, the brand and the people to make it happen and either way expect lots more store to move into this new retail frontier.

For more thoughts listen in (15 mins 59 secs) as radio Hong Kong 3’s Phil Whelan and I catch up for our weekly chat and this week tackle the brave new world of retail.

HK3’s Phil Whelan’s comment “everything old is new again” strikes a chord as we catch up for our weekly on air chat, this week to explore why online retail giants like Amazon are experimenting with opening physical bricks and mortar store and it all comes down to maturity and you can’t keep a good topic down so later in the week I caught up with Kier @ ABC Far North and Anthony Tilli @ Austereo to keep the chat alive and look at it from a regional Australian perspective.

The red cordial hyper phase online shopping era has thankfully passed and with it we are returning to demanding the best and most appropriate retail experience regardless of whether its online offline or a mixture of both and the appropriate buying experience will be dynamically be determined by the transaction and the people involved.

Amazon is reported to be opening up to 400 USA physical bookstores, and although these have not been confirmed, if they do eventuate they will be unlike the large format bookstores of old Borders and instead will the Amazon retailing secret sauce, which when boiled down is that Amazon is an incredible logistics company, that know which products customers want, where and when and can get it to them at a great price and super fast.

These stores will be merchandised with a smaller range of books personalised to that location using Amazon’s analytics of what that regions interests and past buying habits are; the books will be front facing and using an app on your mobile phone you’ll be able to explore its price, contents, reviews, buy it there and then or buy it online for delivery. Using this business model and smarts Amazon can dramatically lower the traditional costs of running a retail store and if they wish could also use these outlets to digitally show and push anything from their vast digital product catalogue.

The other driving force is growing digital retail fatigue, with recent research finding that there are 800,000+ on line retail store making it harder to be found and the costs of key words, used to drive traffic to sites, increasingly dramatically with the likes of Macy and Nordstrom each spending around US$6.4 million annually to get the online jump on their competitors.

In Australia we’ve had Kogan trial physical retailing, Milan Direct announcing a roll out of stores and pop up stores galore each stuffed with online retailers posing as bricks and mortar sellers , these and may others are heralding in an devolution in retailing.

We’re going back to the core of great retailing, where sales are the end purpose, but to get a sale you’ve got to give the customer what they want.

In these new blended digital physical stores, it’s not just about selling, it may be about showrooming or webrooming (digital showrooms), it may be about customer engagement, it may be about see and feel, or brand experience and progression, or for a myriad of other marketing reasons.

No longer does one size have to fit all as we finally return to a maturity level where retail is retail, customers are customers and the coming together of the two will be dictated by the where, how, when and why of the transaction and the ability of the retailer to engage and satisfy their customer.

There is a long list of household names that have vacated the retail world. Dick Smith and Masters are now on the list and others are likely to follow.

New retailers are pushing out more familiar names.

More household names could be set to disappear into Australian retailing history following the demise of Dick Smith this week.

The electronics retailer had been a stalwart of the market for 48 years, but the Dick Smith name alone proved not to be enough to save the ailing company and the jobs of nearly 3000 people.

Masters, the ill-starred hardware start-up owned by Woolworths, is another name that will vanish without trace when the stores close in coming months.

In a move that will be particularly galling to its owners, 14 of the Masters stores will be rebadged by its major competitor Bunnings, the main factor in its failure.

Australians are world-class shoppers – the nation’s 1370 shopping centres is the highest number per capita in the world – but that hasn’t been enough to save some of our favourite stores.

Offshore retailers have arrived

The Australian shopping scene has become a magnet for offshore retailers in recent years with some big names entering the market and winning a place for themselves. European groups like Zara, H&M and Topshop have made a particularly big splash.

“Those overseas players have been reporting strong trading results, up about nine per cent when the average for Australian retailing is more like three per cent,” says Brian Walker, principal of advisory firm Retail Doctor Group.

That growth is having a big effect on some players in the market.

“Target is mid-range in clothing and it used to have little competition. But in recent years you’ve had competitors like Zara come into the market. Target has fallen back and has suffered as a result,” business futurist Morris Miselowskisaid.

This new competition appears to be having an effect inside Target’s management.

Its owner, Wesfarmers, announced this week that Kmart CEO Guy Russo would now have oversight of Target as well, ending the group’s traditional independence within the Coles group.

Eventually, that may lead to a merger with Kmart and the end of the Target name.

“I think a melding of the two should have happened years ago,” Mr Miselowski said.

Another independent retailer that may disappear is Myer, which Mr Miselowski believes will have to merge with David Jones.

DJ’s was bought by South Africa’s Woolworths (not related to the Australian supermarket group) for $2.2 billion in 2014 and it has recently outperformed Myer.

Myer has struggled for years and is in the middle of a restructure that will see it close 20 per cent of its stores while upgrading those that remain.

It’s share price at $1.10, is far below the $4.10 it was floated at by private equity group TPG back in 2009.

Other hard-fought areas in recent years have been toys and books. The book market has been hit by the double whammy of international online sellers like Amazon while at the same time the disruptive technology of the ebook has made itself felt.

Big book store Borders was forced out of the market five years ago and 42 Angus & Robertson stores were closed at the same time. The ABC is also closing its iconic ABC shops leaving its book sales with only an online presence.

Toys are tough

It’s tough in the toy shops.

In toys, “the big players are pushing out the smaller players”, according to Russel Kingshott, lecturer in retailing at Curtin Business School in Perth.

“Small specialist hobby shops are doing well and Kmart is doing well online,” Mr Kingshott said.

To succeed in this hyper competitive world retailers need “omni distribution arrangements”, he said.

“It’s not necessarily only about internet sales as online sales are only six to eight per cent of the retail market,” Mr Kingshott said.

But a good online presence, a well recognised brand and “great service” are vital for retailers, Mr Kingshott said.

Retailers overseas are already starting to rely on virtual stock, where products are viewed in a bricks and mortar store digitally and ordered for quick delivery, Mr Miselowski said.

The wailing and crying over the supposed death of physical retail stores seems to have been raging forever, but really it’s a recent conversation and one that is way overhyped.

Obviously there is a relatively new retail player that lives inside the digital world and starting from a zero base only a decade or so ago has taken a lot of the conversation, but put into perspective Australians last year spent $265 billion in retail stores and only 13% of that was spent online.

I have never believed that physical retail would disappear and be replaced by a totally digital online space, it just doesn’t make sense and overlooks a fundamental need we have as human beings of wanting to go to the village square, meet people, gossip, catch up, be seen, eat and buy and this innate need isn’t going to be satisfied by a totally online experience.

We have however found great purpose in online shopping – convenience, global reach, 24/7 availability, research and of course price comparison and this is where our special guest Ben Lipschitz of newly launched Shopping Ninja came into our conversation joining 4BC’s Clare Blake and myself in studio.

Ben took us through this new Australian based price comparison website and app that once downloaded sits in the background of your search engine waiting for you to shop and when you do then does its own online research bringing you back what it believes are the best prices on your white goods, liqueur or other products you’re searching for.

This is part of new set of anticpatory online tools we are using that don’t require us to remember that they’re there nor do need to activate them, but rather after we’ve installed them and given them permission to ongoing search for us, it sits in the background until we need them and then pops up do its job before disappearing again.

We then moved on to look at the future of the retail and Clare reminded me of a working exhibition I curated and built in 2009 looking at the future of retail and what technology we might expect in 2020, here’s a video segment from Channel 10’s morning program.

I love looking back at these old pieces and the foresight thinking then and in this case am proud to say that I got it right and that there is still stuff we were able to prototype and build then, that is just starting to be seen now.

Remember the local fish and chip store, Chinese restaurant, pie and sauce and chicko roll? Well, they like many other cultural norms, made way for their successor the mostly American hamburger and pizza format stores which 40 years ago heralded in a new way to eat-out and a new cuisine.

These store have done well and are still market giants and IBIS tells us that as of April 2015 McDonald’s held 16.5% of the fast food marketplace and sold $2.35 billion last year. KFC and Pizza Hit, owned by Yum! Restaurants, held 10.1% and turned over $1.43 billion last year and Subway accounts for 9.8% and had a turnover of $1.395 billion last year.

IBIS World Fast Food Services in Australia April 2015

But as with every other industry, these huge readily available food stores are feeling a tap on the shoulder as the next generation of food for sale hits our streets.

This prompted Rod Quinn of ABC Overnight’s to strike up another one of our regular early morning chats looking at the future of the fast food industry.

It seems that our tastes are moving gourmet, local and slow. We still want convenience but are willing to wait just a little longer for something that appears to be more nutritious and healthier.

Our existing big chains are trying to lead the charge by changing and extending their menus, but there other many new kids on the block offering a variety of new cuisines, new formats and new in store experiences. We’re seeing new stores, premium products, new floor plans, new ethnic foods, street carts and vans and a strong local community vibe permeating most of the in store marketing and look and feel.

Where to next for our fast/slow foods, this years top food trends, past food failures and successes and a quick tour around the world at what’s hot in take out foods and stores all made for a really great conversation and thanks to Dave, Mark, John, Bill, Tom, Greg, George, Pete, James, Ray, Geoff, Herb, Riley and Dale for calling and texting in and apologies to all the others that we couldn’t get to, this was truly a hot topic with lots of reminiscing, lamenting, questioning and hypothesising.

Have a listen to the segment now (45 minutes 26 seconds), share it around and join the conversation by letting me know what you want from the future of your fast food.

One of the most often asked questions I get around the future of retail is whether today’s shopping malls will still be around in the near to mid future?

The answer is emphatically YES.

In 2014, 40 cents out of every one (1) retail dollar in Australia was spent in a shopping mall (approx. $110 billion per annum), 9 million Australians owned shares in shopping centres and Australia’s largest 9 shopping centres had billions of dollars of refurbishment underway.

Add to this that the mall’s very existence is hard-wired into our DNA, we are herd animals, we love to get together and the local village square, shuk and market have for millenniums offered this little oasis, a place to shop, meet, greet, catch up on the gossip and take time out of from our usual routine and chores.

With all of this pent-up consumer demand, shopping centre investment and societal need colliding together, the future picture isn’t so bad.

Shopping centres, like every other industry on the planet, are being disrupted. There are new players, new brands, new forms of engagement, digital and physical opportunities and a global reach and transparency the likes of which consumers and retailers have never had before.

These can be both threats and opportunities and again like every industry and throughout mankind the wise and profitable do as they have always done, see lemons and make lemonade and the remainder choose to blame, become sour and wither.

There is no doubt that retail and shopping centres are going through upheaval, but put into context shopping malls have only been in Australia for 50 years and to bring them online the strip shopping centre suffered.

Our centres are not as straightforward as we think. We often think of the large retail brands as being the majority of shopping centre tenants, but in fact in terms of sales volumes it’s closer to 41% supermarkets, 37% specialty stores (small businesses often franchisees), 13% discount department stores (Kmart, Harrison Scarfe, Big W etc.), 7% mini majors (JB Hi Fi etc.) and then 2% department stores.

We also have to take into account the new global retailers that have entered our centres – Uniqlo, H&M, TopShop, Zara (a prediction I made on TV in 2009), the changes to stocking, merchandising and customer service they have brought with them and the many international retailers, including Chinese, that we have not yet seen will also greatly influence the future of our malls.

Yes we’re in for an evolution. There is change ahead. We will come out of it very different, but in the end we will still have physical shopping centres and malls, but what we have them for and how we use them is up to us to decide as we evolve our way into the future of shopping.

In my semi regular chat with Rod Quinn of Overnights on radio ABC local we explored the past, present and future of the shopping mall; queried whether a shopping centre, mall and arcade are the same thing, looked around the world at good and bad examples of malls and took lots of listeners calls on their thoughts and experiences of the shopping mall.

Woolworth’s recently published a report on the Future of the Supermarkets complete with predictions about who their future consumers may be and the what, where, when and how of what they might want from them and this was the spark that started the chat between Rod Quinn of ABC Local’s Overnight and I.

In this 45 minute radio segment we discussed all things Future Retail and took a tonne of callers questions (who knew there were so many people awake and interested at 4.15 a.m.) around the topics of:

• The increasing shoppers’ desire for “local” and “fresh” produce
• Whether in-store shopping will be for these items only
• Whether long-term food items, i.e. pantry items, will be ordered almost entirely online
• The change in the grocery shopping experience and self checkouts
• How “local” and “fresh” produce is monitored and marketed
• Whether the “average shopper” has changed from a nuclear family / mum buying the groceries
• How Australia’s supermarkets will adapt, or how they need to adapt, to meet this desire for a different shopping experience
• The cramped aisle concept being on its way out as supermarkets evolve into something altogether different.
• How likely the Big Two – Coles & Woolworths, or Colesworth as we affectionately called them, may be affected by changing consumer sentiment in the future?

A great discussion and some really great callers questions, click on the this link ovn3, wait for the pop up screen and then choose your player or download option.

ABC Perth Radio – Breakfast Show with James Lush

A great topic always has lot’s of different angles and possibilities and I picked up the thread of the Future of Retail later that same day on my regular Saturday Breakfast segment with James Lush on ABC Perth, have a listen to this for a different take on the Future of Retail: